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Governance remains a vital framework for building effective supplier management but needs to be applied consistently and with more rigour.
Positive steps have been taken to expand the criteria used for segmentation, and the key considerations are mostly in place. What has happened over the last few years should lead us to review the weightings these criteria are given in the segmentation process. We would expect business criticality and supply chain risk to be weighted more in the future as supply continuity balances cost. Treatment strategies are what translates a supplier segmentation assignment into reality. This is when the various strands of supplier management practice are pulled together to create the optimised approach for each supplier. These strands need to include the requisite behaviours that also align with the nature of the relationship. More collaborative and strategic relationships that will make the organisation more resilient will only thrive if supported by effective contract, performance and risk management. As a baseline, appropriate KPIs need to be in place and measured with regular reviews to drive performance. The legacy of the extraordinary
sequence of events we have experienced might well be the long overdue recognition of risk management as a vital component of good governance. The key opportunities in the area of governance are: • Realign segmentation weighting to re-evaluate what is most important to the business and reflect that in the treatment strategies applied as part of supplier management. • Develop the model behaviours expected of both parties based on the target relationship identified through segmentation. • Use technology to make governance as
effective and efficient as possible. • Create a step change in contract, performance management and risk management to underpin supply chain resilience.
from your supplier relationships
Governance is the engine room of Supplier Management. Build the optimum structure to manage your suppliers according to their strategic importance. First step: discover why segmenting
Performance and risk management is still conducted on an ad hoc basis.
your suppliers is so important.
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